1/16/2012

Iran warns Gulf nations not to boost oil production

IRAN warned Gulf Arab oil producers against boosting production to offset any potential drop in Tehran’s crude exports in the event of an embargo affecting oil sales, the latest salvo in the dispute between the West and the Islamic Republic over its nuclear programme.

The comments by Iran’s OPEC governor, published yesterday, came as Saudi Arabia’s oil minister was quoted denying his country’s earlier pledges to boost output as needed to meet global demand was linked to a potential siphoning of Iranian crude from the market because of sanctions.

World oil markets have been jolted over concerns that Iran may choke off the vital Strait of Hormuz in retaliation for sanctions hampering its ability to sell its oil. Saudi Arabia and other key Gulf Arab producers have recently said they are ready to provide stable and secure supplies of oil.

The US recently imposed sanctions targeting Iran’s central bank and, by extension, refiners’ ability to buy and pay for crude. The European Union is also weighing an embargo on Iranian oil, while Japan, one of Iran’s top Asian customers, has pledged to buy less crude from the country.

Mohammad Ali Khatibi, Iran’s OPEC governor, was quoted yesterday by the pro-reform Shargh newspaper as saying that attempts by Gulf nations to replace Iran’s output with their own would make them an "accomplice in further events".

"These acts will not be considered friendly," Khatibi said, adding that, if the Arab producers "apply prudence and announce that they will not participate in replacing oil, then adventurist countries will not show interest" in the embargo.

The embargo concerns are linked to Iran’s nuclear programme. The West maintains Iran is enriching uranium for weapons purposes while Tehran says its programme is for purely peaceful purposes such as generating electricity.

Saudi Arabia, the world’s largest oil producer and a close US ally, had said that it was ready to raise its output to accommodate global market needs.

The country is the only member of 12-nation OPEC that has significant spare capacity, currently estimated at roughly more than 2 million barrels a day.

With concerns building amid the standoff between Iran and the West over Tehran’s nuclear programme, a string of Asian and Western officials have visited Saudi Arabia over the past week. While offering assurances that it could meet a shortfall in supply through its spare capacity, Saudi officials have also been careful to say that it was an internal matter if nations chose to abide by any sanctions.

Oil Minister Ali Al-Naimi appeared to try to further clarify the country’s position in comments yesterday in the daily Al-Ektisadiyah newspaper.

"We never said Saudi Arabia is trying to compensate for Iranian oil in the case that sanctions (are enacted)," Al-Naimi was quoted as saying. "We said that we are prepared to meet the increase in global demand as a result of any circumstances."

Washington has said it would not tolerate any closure of the strait — the export route for one third of all seaborne traded oil — with Defence Secretary Leon Panetta has saying such a move would require a response.